What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-03-28 compared with 2024-04-01 · 244 added, 141 removed, 222 unchanged (63% of the section changed)

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HCW Biologics Inc.

is a clinical-stage biopharmaceutical company focused on discovering and developing novel immunotherapies to lengthen health span by disrupting the link between chronic, low-grade inflammation and age-related diseases.

We believe age-related, chronic, low-grade inflammation, or “inflammaging,” is a significant contributing factor to several diseases and conditions, such as cancer, cardiovascular disease, diabetes, neurodegenerative diseases, and autoimmune diseases.

The induction and retention of low-grade inflammation in an aging human body is mainly the result of the accumulation of non-proliferative but metabolically active senescent cells, which can also be caused by persistent activation of protein complexes, known as inflammasomes, in innate immune cells.

These two elements share common mechanisms in promoting secretion of proinflammatory proteins and in many cases interact to drive senescence, and thus, inflammaging.

Our novel approach is to reduce senescent cells and eliminate the proinflammatory factors they secrete systemically through multiple pathways.

We believe our approach has the potential to fundamentally change the treatment of age-related diseases.

Accumulation of senescent cells with a senescence-associated proinflammatory factors has been implicated as a major source of chronic sterile inflammation leading to many aging-related pathologies.

The key to the HCWB immunotherapeutic approach is elimination of senescent cells and the proinflammatory factors they secrete.

Our lead product candidates address the two primary processes that promote chronic inflammation, as explained below:

Subcutaneous administration of our clinical-stage, lead drug candidate, HCW9218, activates NK cells, innate lymphoid group-1, and CD8 + T cells, and neutralizes TGF-β.

This bifunctionality gives HCW9218 the ability to reduce senescent cells as well as eliminate senescence-associated proinflammatory factors that function as a senomorphic.

HCW9218 is the basis for our cancer program.

Subcutaneous administration of our preclinical-stage, lead drug candidate, HCW9302, is designed to activate and expand T reg cells to reduce senescence by suppressing the activity of inflammasome-bearing cells and the inflammatory factors which they secrete.

HCW9302 is the basis for our autoimmune program.

(“HCWB” or the “Company”) is a clinical-stage biopharmaceutical company developing proprietary immunotherapies to treat diseases promoted by chronic inflammation, especially age-related and senescence-associated diseases.

Our immunotherapeutics represent a new class of drug that we believe has the potential to fundamentally change the treatment of cancer and many other diseases and conditions that are promoted by chronic inflammation — and in doing so, improve patients’ quality of life and possibly extend longevity.

2024 was a pivot point for us.

In July 2024, we entered a settlement and general release agreement (“Settlement Agreement”) resolving a long-running arbitration proceeding brought against the Company and Dr.

Wong, our Founder and Chief Executive Officer, by Altor BioScience, LLC, NantCell, Inc.

and ImmunityBio, Inc.

(collectively herein, “ImmunityBio”).

With the Settlement Agreement, we closed the chapter on an approximately 18-month period during which our clinical development, business development and capital-raising activities were placed substantially on “hold,” awaiting resolution of claims made against us and Dr.

Wong by ImmunityBio.

See Part I, Item 3.

- “Legal Proceedings.” The Settlement Agreement related to the Company’s TOBI Molecules, including HCW9218 and HCW9302, our lead product candidates, among others.

The Company retains all rights to develop and commercialize HCW9302, our clinical-stage, lead product candidate for our autoimmune and proinflammatory disease program.

In addition, we hold exclusive rights to develop and commercialize HCW9218 in non-oncology indications, as well as HCW9206 and HCW9201 in all indications.

The Settlement Agreement had no impact on our exclusive worldwide license agreement with Wugen Inc.

(“Wugen License”).

We entered the Wugen License in 2020, granting Wugen Inc.

(“Wugen”) limited rights to develop cell-based immunotherapeutic treatments for cancer indications using HCW9206 and HCW9201.

WU-NK-101, the Wugen product developed using the licensed molecules, is now being evaluated in a Phase 2 clinical study in solid tumors.

ImmunityBio controls the supply of HCW9218, and one of the critical components of continuing our development of HCW9218 is successfully obtaining a supply agreement with ImmunityBio.

In the fourth quarter of 2024, we revealed a new drug discovery and development platform, with a novel scaffolding or “backbone” of proteins called T-cell Receptor β Chain constant region (“TRBC”).

The TRBC platform leverages our in-depth knowledge of T cell and natural killer (“NK”) cell immunology.

We have developed molecules in each of these classes for treatments of hematologic and solid tumors, virally infected cells, and cellular senescence diseases associated with aging.

TRBC Molecules are grouped into three classes, based on their utilities:

Multi-Functional Immune Cell Stimulators;

Second-Generation Immune Checkpoint Inhibitors and Multi-Specific Targeting Fusions;

and Class III:

Enhanced Immune Cell Engagers.

The Company is making an efficacy assessment using relevant animal models, by the end of 2025, results of these studies are expected to show the optimal construction for lead product candidates(s).

With clarity on ownership of intellectual property, the Company reassessed its clinical development pipeline and the future direction of our Company.

Our expertise is in immunotherapeutic treatments and our clinical development pipeline will remain so.

Our focus continues to be to develop protein-based immunotherapies that are administered by subcutaneous injection.

We remain focused on diseases promoted by chronic inflammation driven by senescence, including cancer, especially age-related diseases.

The diseases we will target will have no curative FDA approved treatments.

Finally, we have selected programs that include life-threatening diseases, such as pancreatic and ovarian cancer, as well as “quality-of-life” indications, such as alopecia areata and senile lentigo.

HCW9302 will remain one of our lead product candidates.

Future drug discovery and new drug development will be based on TRBC Molecules.

There are several potential candidates in each class of TRBC Molecules from which the Company will select lead molecules for each program.

Part of this selection will be to determine which TRBC molecules will be developed in-house and which are more appropriate to develop through business development transactions, such as out-licensing agreements.

Business Highlights

The Company completed the following transactions with the purpose of raising funds required to launch Phase 2 clinical studies to evaluate HCW9218 in ovarian and pancreatic cancer, continue research on expanded indications beyond cancer for HCW9218, and begin the clinical development of HCW9302:

Business Development Transaction

On November 17, 2024, the Company entered an exclusive worldwide license agreement with WY Biotech Co., Ltd.

(“WY Biotech”), a China-based company specializing in the early-stage development of recombinant protein drugs and gene/cell therapies, to develop and commercialize HCW11-006, one of the Company’s product candidates generated with our TRBC drug discovery platform, for therapeutic use (the “WY License Agreement”).

Key terms of the WY License Agreement include that WY Biotech has agreed to pay HCWB $7.0 million in an upfront payment.

As the Company disclosed in the Form 8-K filed on March 19, 2025, the Company and WY Biotech agreed to amend the WY Biotech License Agreement due to a delay in WY Biotech coming to a definitive agreement with their designated contract development and manufacturing organization (“CDMO”).

Specifically, in order to accommodate the delay, the parties agreed to restructure the payment schedule for the $7.0 million upfront license fees, including delaying the initial $4.0 million portion thereof that was originally due on or about March 17, 2025, to reduce the performance milestones that the Company must complete in order to earn the full $7.0 million nonrefundable upfront payment in June 2025, and to provide that either party may terminate the Agreement if WY Biotech is not able to definitively engage its CDMO by June 2025.

Under the amended terms, the Company expects to fulfill our performance obligations and earn the full $7.0 million upfront fee in June 2025.

There were no other material changes to the WY Biotech License Agreement, which involves the grant to WY Biotech of an exclusive, world-wide license to use and apply HCW11-006 for in vivo applications.

See Exhibits 10.27 and 10.28 to this Annual Report on Form 10-K.

The Company has now completed extensive preclinical studies that further support our belief in the potential for HCW11-006 for both an in vivo and ex vivo therapy.

The in vivo therapy is licensed by WY Biotech, however, the Company retained all rights to the ex vivo therapy and applications as a reagent in cell-based therapy treatments, including cell-based therapies, such as CAR-T therapies.

The Company considers WY Biotech License provisions for the Opt-In Right to take over the development of HCW11-006 for the Americas markets to be an important feature of the WY Biotech License.

We believe our right to recapture this market is a potentially high value opportunity.

Further, we will be able to base our decision to opt-in on the human-data read-out from a Phase 1 clinical trial, which will mitigate our development risks and provide valuable clinical information about the potential for the indications we will use for Phase 2 clinical studies.

See Part I, “Business —Out-License Programs.”

The Company has identified the Class III TRBC Molecules, Immune Cell Engagers, as the next program for out-licensing.

In light of recent transactions coupled with the challenges of clinical development, we plan to take advantage of industry interest in this breakthrough drug.

The Company continually assesses our portfolio of molecules in order to identify potential business development opportunities.

• On February 20, 2024, we sold an aggregate of 1,785,718 shares of our common stock to certain of our officers and directors, at a purchase price of $1.40 per share, for an aggregate purchase price of $2.5 million.

• As of March 31, 2024, the Company entered into legally binding agreements to issue $10.0 million of secured notes from investors, including certain of our officers and directors as well as other investors.

We received $2.0 million of funds by the issuance date of the financial statements contained elsewhere in this Annual Report.

On January 10, 2024, we exercised our right to terminate the credit agreement (the “Credit Agreement”), dated April 21, 2023 (“Closing Date”), between the Company and Prime Capital Ventures, LLC (the “Lender”).

We had no borrowings under the Credit Agreement.

On March 6, 2024, the Lender defaulted on its obligation to refund $5.3 million that we funded on the Closing Date to establish an interest reserve account.

Actions have been taken that would benefit the creditors who have terminated their credit agreements and similarly sought to recover funds paid for an interest reserve, including receivership and legal remedies.

Given the limited success that these efforts have had to date for the recovery of funds for creditors, the Company recognized a reserve for a credit loss for the full amount of $5.3 million as of December 31, 2023, which is a noncash adjustment in the accompanying

statements of cash flow, and an operating cost presented in the accompanying statements of operations.

However, we intend to pursue all available remedies to recover these funds, including legal actions, receivership and insurance.

As of December 31, 2023, we held $3.6 million of cash and cash equivalents and there was substantial doubt about our ability to continue as a going concern.

Since that time, we have entered into agreements to raise $12.5 million of financing, consisting of funds received and legally binding funding commitments.

And, we continue with other fundraising efforts that we are targeting to complete in the next three to six months.

Under the guidance of Topic 205-40 for going concern assessment, we evaluated whether we mitigated the substantial doubt over our ability to remain a going concern for the next 12 months from the issuance date of the financial statements included elsewhere in this Annual Report.

If no additional financings occur after the issuance date, we believe the relevant conditions that brought about substantial doubt can be alleviated if we implement a plan that includes certain adjustments to our strategic and operating plans, such as cutting back on the number of investigative studies and Phase 2 clinical trials we initiate;

reducing salaries and other spending, and limiting the amount of cash used to reduce accounts payable, as well as other adjustments to alleviate substantial doubt.

• Through October 31, 2024, the Company issued an aggregate of $6.9 million in Senior Notes, which are secured by the Company’s shares of Wugen common stock which were consideration for the license fee for the Wugen License.

The holders of $6.6 million of the outstanding principal for the Senior Notes have agreed to Principal Terms for the conversion into shares of the Company’s Common Stock at a conversion price of $0.65 per share, warrants to purchase $3.3 million of the Company’s Common Stock at an exercise price of $0.65 per share, and some of the Company’s shares of Wugen common stock.

The conversion is subject to stockholder approval.

See Part II, Item 9B, “Other Information” for more information on the Special Meeting of the Stockholders.

• On November 18, 2024, the Company entered a $6.9 million securities purchase agreement with an institutional investor, involving a registered direct offering and a concurrent private placement of common stock and warrants.

The offering, priced above market under Nasdaq rules and closed on November 20, 2024.

As a result of this offering, the Company issued 6,717,000 shares of Common Stock and warrants to purchase 6,717,000 shares of Common Stock at $1.03 per shares, at a combined price of $1.03 per unit consisting of one share of Common Stock and one five-year warrant to purchase a share of Common Stock.

Compliance with Nasdaq Listing Rules

• On March 3, 2025, the Nasdaq Hearings Panel (the “Panel”) of The Nasdaq Stock Market LLC (“Nasdaq” or the “Exchange”) granted the Company an extension in which to regain compliance with all Nasdaq continued listing rules.

The Panel’s determination followed a hearing on February 13, 2025, at which the Panel considered the Company’s plan to regain compliance with Listing Rules 5450(a)(1), 5450(b)(2)(A) and 5450(b)(2&3)(C), the minimum bid price (“Bid Price”), the market value of publicly held securities (“MVPHS”) and the market value of listed securities (“MVLS”) rules, respectively.

As a result of the extension, the Panel granted the Company’s request for continued listing on the Exchange, provided that the Company demonstrates compliance with the Bid Price Rule by April 28, 2025, and all other Exchange continued listing rules by June 15, 2025.

Clinical Development

• The Phase 1 clinical trial to evaluate HCW9218 in solid tumors and the Phase 1b clinical trial to evaluate HCW9218 in pancreatic cancer were completed in February 2024.

In the Phase 1 study, over 70% of patients with ovarian cancer (5/7) showed evidence of stable disease.

In the Phase 1b study, 13% (2/15) of patients who participated in the study showed evidence of stable disease.

The studies met the primary objective to determine a RP2D.

• In February 2024, we entered into an agreement with UPMC to conduct an Investigator-sponsored Phase 2 clinical trial to evaluate HCW9218 in patients with metastatic advanced stage ovarian cancer in combination with neoadjuvant chemotherapy.

Patient enrollment is expected to begin in the first half of 2024.

• In the first half of 2024, we expect to initiate a randomized Phase 2 clinical trial with NCI, operating under our existing CRADA, to evaluate HCW9218 in the treatment of advanced pancreatic cancer in combination with standard-of-care chemotherapy.

• In the coming year, we are considering expanding our clinical studies to other age-related indications beyond cancer, some of which may be secondary endpoints of studies in cancer indications.

For example, we are currently evaluating a Phase 2 clinical studies in skin cancer which could give us an opportunity to evaluate HCW9218 in the treatment of senile lentigo, the age-related disease that is characterized by benign, darkened spots on the skin, as a secondary endpoint of the cancer study.

• In the coming year, we intend to have our second lead product candidate, HCW9302, enter the clinical stage of development.

We are preparing an IND application to evaluate HCW9302 in an autoimmune disease, which we plan to submit in the first half of 2024.

There can be no assurance that the FDA will authorize us to initiate our planned clinical trials on a timely basis, or at all.

In the event we do not receive feedback on a timely basis, or we are required to change the design of our clinical protocol or address other feedback, clinical development of our products would be delayed and our costs may increase.

Scientific Publications and Conferences in 2023

• In April 2023, a poster entitled, “Bifunctional Immunotherapeutic HCW9218 Facilitates Recruitment of Immune Cells from Tumor Draining Lymph Nodes to Promote Antitumor Activity and Enhance Checkpoint Blockade Efficacy in Solid Tumors”, was presented at the 2023 Annual Meeting of the American Association of Cancer Research.

• In May 2023, a pivotal scientific paper authored by our scientific research team was published in the peer-reviewed journal, Aging Cell , entitled, “Immunotherapeutic Approach to Reduce Senescent Cells and Alleviate Senescence-Associated Secretory Phenotype in Mice.”

• In November 2023, there was a preliminary human data readout at the 38th Annual Meeting of the Society for Immunotherapy of Cancer conference, from the Phase 1 clinical trial to evaluate HCW9218 in patients with chemo-refractory/chemo-resistant solid tumors.

• On January 28, 2025, the Company received clearance of its IND from the FDA to initiate a first-in-human Phase 1 dose escalation clinical trial to evaluate one of its lead drug candidates, HCW9302, in patients with moderate-to-severe alopecia areata, a common autoimmune disease in humans that currently has no curative FDA approved treatments.

• As of December 31, 2024, the Company was required to close the Phase 2 clinical study to evaluate HCW9218 in combination with neoadjuvant chemotherapy in the treatment of ovarian cancer sponsored by the University of Pittsburgh Medical Center, as required under the Settlement Agreement, due to lack of enrollment.

Trends and Uncertainties

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However, the extent and duration of such events and conditions, and resulting disruptions to our operations, are highly unpredictable.

For discussion of risks related to potential impacts of supply chain, inflation, geopolitical and macroeconomic challenges on our operations, business results and financial condition, see “Part II, Item 1A.

For discussion of risks related to potential impacts of supply chain, inflation, geopolitical and macroeconomic challenges on our operations, business results and financial condition, see Item 1A.

“Risk Factors” in this Annual Report.

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We have no products approved for commercial sale and have not generated any revenue from commercial product sales of internally-developed immunotherapeutic products for the treatment of cancer and other age-related diseases.

The principal source of our revenues to date have been generated from our Wugen License and Master Services Agreement (the “MSA”) with Wugen.

See Note 1 to our audited financial statements included elsewhere in this Annual Report for these definitions and more information.

The principal source of our revenues to date have been generated from worldwide exclusive licenses for rights to develop and commercialize some of our proprietary molecules.

See Note 1 to our audited financial statements included elsewhere in this Annual Report for more information.

Wugen License

We derive revenue from a license agreement granting rights to Wugen to further develop and commercialize products based on two of our internally-developed molecules.

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The Company recognized revenue for the related consideration at a point in time.

The revenue recognized from a transaction to supply clinical and research grade materials entered into under the MSA and covered by a Statement of Work (“SOW”), represents one performance obligation that is satisfied over time.

The revenue recognized from a transaction to supply clinical and research grade materials entered into under the MSA and covered by a Statement of Work, represents one performance obligation that is satisfied over time.

The Company recognizes revenue generated for supply of material for clinical development using an input method based on the costs incurred relative to the total expected cost, which determines the extent of the Company’s progress toward completion.

WY Biotech License

We expect to derive revenue from a license agreement granting rights to WY Biotech to further develop and commercialize products based on one of our internally-developed molecules.

Consideration under our contract included a nonrefundable upfront payment, development, regulatory and commercial milestones, and royalties based on net sales of approved products.

We assessed which activities in the WY Biotech License, as amended, should be considered distinct performance obligations that should be accounted for separately.

We concluded that there is one performance obligation relating to the granting of a license and delivery of the Technology Transfer Report for certification of the licensed molecule required to develop the preclinical licensed molecule.

Therefore, the Company will not recognize revenue until the Technology Transfer Report is delivered for certification of the licensed molecule, which we anticipate will take place in the second quarter of 2025.

Operating Expenses

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For example, if the FDA or another regulatory authority were to delay our planned start of clinical trials or require us to conduct clinical trials or other testing beyond those that we currently expect or if we experience significant delays in enrollment in any of our planned clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development of that product candidate.

General and Administrative Expenses

General and administrative expenses consist primarily of employee-related expenses, including salaries, related benefits, and stock-based compensation expense for employees in the executive, legal, finance and accounting, human resources, and other administrative functions.

General and administrative expenses also include third-party costs such as insurance costs, fees for professional services, such as legal, auditing and tax services, facilities administrative costs, and other expenses.

During the period ended December 31, 2022, Altor/NantCell, a former employer of Dr.

Wong, our Founder and Chief Executive Officer, initiated legal proceedings against Dr.

General and administrative expenses also include third-party costs such as insurance costs, fees for professional services, such as legal fees in the ordinary course of business, auditing and tax services, facilities administrative costs, and other expenses.

We expect general and administrative expenses incurred in the normal course of business for other purposes, such as costs for recruitment and retention of personnel, service fees for consultants, advisors and accountants, as well as costs to comply with government regulations, corporate governance, internal control over financial reporting, insurance and other requirements for a public company, to continue to increase for the foreseeable future as we build our clinical programs.

Legal Expenses

Legal expenses consist of fees incurred by the Company in its own defense and that of officers and employees in connection with a legal matter brought against the Company and Dr.

Wong, our Founder and Chief Executive Officer, by a former employer of Dr.

During the period ended December 31, 2022, Altor/NantCell initiated legal proceedings against Dr.

Wong and the Company.

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On April 27, 2023, the U.S.

District Court for the Southern District of Florida (the “Court”) with jurisdiction over lawsuit against the Company approved the parties’ stipulation and ordered the parties to arbitration.

District Court for the Southern District of Florida (the “Court”) with jurisdiction over the lawsuit against the Company approved the parties’ stipulation and ordered the parties to arbitration.

On May 1, 2023, Altor/NantCell filed a demand against the Company before JAMS.

On May 3, 2023, Altor/NantCell dismissed the federal court action without prejudice and the Court ordered the case dismissed without prejudice and closed the case.

Altor/NantCell’s proceeding against the Company is now proceeding in arbitration before JAMS, with an arbitration hearing scheduled for May 20, 2024.

In connection with claims brought against Dr.

Wong, Altor/NantCell has advancement obligations to him for claims brought against him and is currently advancing half of Dr.

Wong’s legal fees while the Company advances the other half of Dr.

Wong’s legal fees;

however, Altor/NantCell is seeking reimbursement of all the legal fees and expenses it has advanced to Dr.

The Company also has incurred legal expenses on its own behalf in the period ended December 31, 2023, and we expect to continue to incur material costs and expenses in connection with defending the Company in the foregoing legal matters during the first half of 2024.

Proceedings against the Company and Dr.

Wong were consolidated in the arbitration before JAMS (the “Arbitration”).

On March 26, 2024, Altor/NantCell filed a complaint (the “Complaint”) against the Company in the Chancery Court of the State of Delaware for the contribution of legal fees and expenses advanced to Dr.

The Arbitration hearing was held on May 20, 2024 to May 31, 2024, after which the parties entered into settlement negotiations.

As reported in the Company’s Form 8-K filed on July 18, 2024 and further described in Part I, Item 3.

– “Legal Proceedings” below, as of July 13, 2024, the Company and Dr.

Wong, the Company’s Founder and Chief Executive Officer, entered into a confidential Settlement Agreement and Release (the “Settlement Agreement”) with Altor BioScience, LLC (“Altor”), NantCell, Inc.

(“NantCell”), and ImmunityBio, Inc.

(the parent of Altor and NantCell, together with Altor and NantCell, “ImmunityBio”), to resolve the previously disclosed Arbitration before JAMS brought by Altor and NantCell as well as a Complaint Altor filed against the Company in the Chancery Court of the State of Delaware for the contribution of legal fees and expenses advanced to Dr.

The Settlement Agreement includes mutual general releases by and among the parties thereto.

No party is required to make any monetary payments to any other party or person under the Settlement Agreement and each party will bear its own expenses incurred in connection with the matter.

In accordance with the provisions of the Settlement Agreement, upon completion of these procedures, the parties mutually stipulated that the Arbitration and Complaint should be dismissed.

The Arbitration and related Complaint were dismissed on or about December 24, 2024.

Reserve for Credit Losses and Other Expenses

The Company recognized a Reserve for credit losses of $5.3 million, reflecting our conclusion that it was not probable that we would recover the interest reserve deposit established upon entering the credit agreement with Prime Capital Ventures (the “Lender”) based on facts known as of December 31, 2023.

As reported in the Company’s Form 8-K filed on January 12, 2024, on January 10, 2024, the Company exercised its right to terminate its credit agreement, dated April 21, 2023, with the Lender, as permitted under the terms of the credit agreement.

Subsequently, the Lender defaulted on its obligation to return the interest reserve deposit.

The Company entered the credit agreement to obtain financing for the purpose of building its proposed manufacturing facility and upgrading its research and laboratory facilities at a property the Company owns in Miramar, Florida.

As reported in the Company’s Form 8-K filed on May 1, 2024 with the SEC, the Company became aware that it was the victim of a criminal scheme involving the impersonation of a purchaser upon the default on a legally binding commitment to purchase $8.0 million of secured notes from the Company.

The scheme resulted in the misdirection of approximately $1.3 million held in Company accounts to a fraudulent account controlled by a third party.

The Company is pursuing all available remedies to recover this loss.

Given the limited success that these efforts have had to date for the recovery of funds, the Company recognized a loss of $1.3 million in the year ended December 31, 2024.

Interest Expense

Interest expense include interest paid on debt.

Interest expense includes interest paid on debt.

This includes interest due on the Cogent Bank loan and Senior Notes issued by the Company.

Other Income, Net

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General and administrative

Reserve for credit losses

Legal expenses

Reserve for credit losses and other expenses

Total operating expenses

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Interest expense

Other (expense) income, net

Other income, net

In the year ended December 31, 2023, we recognized $2.8 million of revenue and cost of revenues of $2.3 million.

Revenues were derived exclusively from the sale of licensed molecules to our licensee, Wugen.

The licensed molecules are one of the inputs for manufacturing Wugen’s products.

Revenues included $1.8 million of revenue that was deferred at December 31, 2021.

During 2022, we entered into SOWs with Wugen for each of the then-current and historical purchases of clinical and research grade materials under the MSA, upon which we determined all requirements for revenue recognition under Topic 606 were met for these transactions for the year ended December 31, 2022.

Revenues were derived exclusively from the sale of licensed molecules to Wugen.

There were no deferred revenues as of December 31, 2023.

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Revenues were derived exclusively from the sale of licensed molecules to Wugen.

Wugen limited its purchases in 2023, due primarily to changes in its clinical development program and delays in ramping up its manufacturing process.

There is currently one ongoing Phase 1 clinical study evaluating WU-NK-101, the Wugen product candidate created using the licensed molecules, in solid tumors.

There were no deferred revenues as of December 31, 2024.

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Research and development expenses decreased by $1.3 million, or 17%, from $7.7 million for the year ended December 31, 2023 to $6.4 million for the year ended December 31, 2024.

This decrease was primarily attributable to decreased expenses for manufacturing and materials, preclinical expenses and performance-based bonuses.

This decrease was primarily attributable to decreased expenses from preclinical and clinical activities.

Salaries, benefits and related expenses decreased by $143,609, or 5%, from $2.9 million for the year ended December 31, 2023 to $2.8 million for the year ended December 31, 2024.

This decrease was primarily attributable to decreases of $185,651 in performance-based bonuses and $115,200 for allocation of costs from salaries, benefits and related expenses to cost of goods sold.

These decreases were partially offset by increases of $43,970 for health insurance and other benefits and $29,640 for payroll and withholding taxes.

Manufacturing and materials expenses decreased by $1.2 million, or 47%, from $2.4 million for the year ended December 31, 2022 to $1.3 million for the year ended December 31, 2023.

In the year ended December 31, 2022, costs were primarily attributable to a 1,000 L GMP run for HCW9218 and completion of a 200 L cGMP run of HCW9302, including finalizing manufacturing reports, fill and finish activities.

In the year ended December 31, 2023, the nature of manufacturing activities changed, as we completed a major manufacturing run for our clinical-stage molecules, HCW9218.

For the year ended December 31, 2023, the costs we incurred were primarily for production activities associated with the master cell bank characterization for the high-expressing version of HCW9101 and ancillary activities such as shipping, insurance and storage.

Expenses associated with preclinical activities decreased by $570,810 or 26%, from $2.2 million for the year ended December 31, 2022 to $1.6 million for the year ended December 31, 2023.

This decrease was primarily attributable to a decline in costs for completing toxicology studies related to IND-enabling activities.

In the year ended December 31, 2022, expenses were related primarily to the cost of toxicology studies and experimental materials in connection with IND-enabling activities required to prepare our IND application to the FDA for permission to conduct a Phase 1b/2 clinical trial to evaluate HCW9302 in an autoimmune indication, alopecia areata.

In the year ended December 31, 2023, toxicology and other IND-enabling studies were winding down, and we began the process of preparing the IND for submission, which we intend to submit in the first half of 2024.

We experienced delays in completing the toxicology studies, as the service provider we engaged had a large backlog of projects due to the government-mandated shutdown during COVID-19 outbreaks.

Expenses associated with clinical trials including professional fees related to regulatory filings, increased by $263,982, or 33%, from $795,749 for the year ended December 31, 2022 to $1.1 million for the year ended December 31, 2023.

We anticipate expenses related to clinical activities will increase substantially in the future, as we enter Phase 2 clinical trials to evaluate HCW9218 in ovarian and pancreatic cancer, as well as other indications.

HCW9218 entered clinical stage in the first half of 2022, upon the initiation of an Investigator-sponsored Phase 1 clinical trial at the Masonic Cancer Center, University of Minnesota to evaluate HCW218 in chemo-refractory/chemo-resistant solid tumors, such as breast, ovarian, prostate and colorectal cancers.

A Company-sponsored Phase 1b/2 clinical trial to evaluate HCW9218 in advanced pancreatic cancer initiated in October 2022.

Both of these studies completed patient enrollment, dosing and the safety-evaluation period in February 2024.

This decrease was primarily attributable to decreases of $43,850 in salaries and related taxes, $52,383 in the cost of benefits and $42,621 in performance-based bonuses.

The Company had a staff reduction in May 2024, and continues to operate with the reduced headcount.

Manufacturing and materials expenses increased by $145,383, or 11%, from $1.3 million for the year ended December 31, 2023 to $1.4 million for the year ended December 31, 2024.

For the year ended December 31, 2023, the costs we incurred were primarily for production activities associated with the master cell bank characterization for the high-expressing version of HCW9101, which is used in the manufacturing process for all TOBI-based molecules, including those licensed to Wugen.

For the year ended December 31, 2024, costs were primarily attributable to the production of HCW9101.

Expenses associated with preclinical activities decreased by $747,900, or 47%, from $1.6 million for the year ended December 31, 2023 to $859,701 for the year ended December 31, 2024.

This decrease was primarily attributable to a decline in costs for completing toxicology studies related to IND-enabling activities for HCW9302.

In the year ended December 31, 2023, toxicology and other IND-enabling studies were winding down, and we began the process of preparing the IND for submission.

In the year ended December 31, 2024, the Company submitted the IND to obtain clearance from the FDA to evaluate HCW9302 in a Phase 1 clinical trial in patients with alopecia areata.

The Company received clearance to begin this trial on January 28, 2025.

Expenses associated with clinical trials, including patient fees, ancillary studies, clinical site operating expenses, professional fees related to regulatory filings and outside collaborations, decreased by $501,516, or 47%, from $1.1 million for the year ended December 31, 2023 to $558,215 for the year ended December 31, 2024.

For the year ended December 31, 2023, the Company had two ongoing clinical studies:

(1) an Investigator-sponsored Phase 1 clinical trial at the Masonic Cancer Center, University of Minnesota to evaluate HCW9218 in chemo-refractory/chemo-resistant solid tumors and (2) a Company-sponsored Phase 1b/2 clinical trial to evaluate HCW9218 in advanced pancreatic cancer, with the National Cancer Institute as the lead clinical site.

Both of these studies were completed in the first half of 2024.

Other expenses, which include overhead allocations, decreased by $39,680, or 5%, from $787,654 for the year ended December 31, 2023 to $747,974 for the year ended December 31, 2024.

This decrease is primarily attributable to a decrease in travel and travel-related expenses.

This decrease is primarily attributable to decreases of $50,823 in travel and travel-related expenses and $12,695 in facilities-related expenses, partially offset by increases of $19,879 in rent and occupancy costs and $4,407 for public relations activities, such as press releases.

General and Administrative Expenses

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Facilities and office expenses

Accretion of fixed bonus upon maturity of Senior Notes

Rent and occupancy expense

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Total general and administrative expenses

General and administrative expenses increased by $5.0 million, or 60%, from $8.3 million for the year ended December 31, 2022 to $13.4 million for the year ended December 31, 2023.

In addition, there was an increase in professional fees, primarily related to legal fees associated with the Altor/NantCell matter.

General and administrative expenses increased by $60,081, or 1%, from $6.8 million for the year ended December 31, 2023 to $6.8 million for the year ended December 31, 2024.

The increase is mainly attributable to an accretion expense of $527,304 for the accretion of the fixed bonus payment that holders of Secured Notes will receive if the Secured Notes are repaid on their Maturity Date of August 31, 2026 and an increase in other expenses, primarily insurance costs, partially offset by a decrease in salaries and benefits.

Salaries, benefits and related expenses decreased by $652,924, or 20%, from $3.2 million for the year ended December 31, 2023 to $2.6 million for the year ended December 31, 2024.

The decrease was primarily due to a decrease of $343,412 related to performance-based bonuses and $119,910 related to equity awards granted to officers and executives, which were partially offset by increases of $217,894 in salaries and wages and $61,377 for health insurance and other benefits.

Professional services increased by $5.4 million, or 230%, from $2.4 million for the year ended December 31, 2022 to $7.8 million for the year ended December 31, 2023.

The increase primarily consisted of a $5.0 million increase in fees for legal services related to the Altor/NantCell matter.

Fees for professional services other than legal advisors, such as auditors and tax advisors, increased by $152,424 for the year ended December 31, 2023 versus the comparable period in 2022.

Fees paid for consulting services, such as investor relations and public relations, decreased by $117,492 for the year ended December 31, 2023 versus the comparable period in 2022.

Facilities and office expenses increased by $225,518, or 55%, from $408,562 for the year ended December 31, 2022 to $634,080 for the year ended December 31, 2023, primarily due to increases of $147,922 in software license fees and $77,596 in costs for office services and equipment.

Other expenses decreased by $446,116, or 26%, from $1.7 million for the year ended December 31, 2022 to $1.3 million for the year ended December 31, 2023.

The decrease is primarily due to a decrease of $580,486 in insurance costs associated with being a public company, partially offset by an increase of $110,412 in Delaware franchise taxes.

Reserve for credit losses

There was a $322,214 decrease in salaries and related taxes resulted from a reduction in staff and temporary salary reductions as part of cost reductions which took place in the second quarter.

In addition, there was a $304,174 decrease in performance-based bonuses, resulting from the waiver of performance-based bonuses due to officers of the Company that were earned in 2022 and deferred until the time they were waived in the second quarter of 2024.

Professional services decreased by $85,994, or 7%, from $1.3 million in the year ended December 31, 2023 to $1.2 million in the year ended December 31, 2024.

Professional services include corporate legal services, legal services for procuring patents, as well as other professional services, such as auditing and tax advisory fees.

The decrease is primarily attributable to a $117,382 decrease in legal fees incurred in connection with procuring patents, partially offset by a $31,389 increase in fees for other professional services such as audit and tax advisory fees.

As a result of the Settlement Agreement, the Company agreed to maintain certain patent protection for rights retained under the Settlement Agreement.

Facilities and office expenses increased by $20,916, or 3%, from $634,080 for the year ended December 31, 2023 to $654,996 for the year ended December 31, 2024, primarily due to increases of $18,290 for janitorial and disposal services and $13,793 for IT services and software licenses, partially offset by a decrease of $12,454 for office equipment and supplies.

There was no accretion in year ended December 31, 2023, but in the year ended December 31, 2024, there was $527,304 in accretion for the fixed bonus payment for Senior Notes issued during 2024.

The terms of the Senior Notes were amended in the third quarter of 2024, adding the provision for the fixed bonus payment if the Senior Notes are held to Maturity.

Other expenses increased by $191,284, or 15%, from $1.3 million for the year ended December 31, 2023 to $1.4 million for the year ended December 31, 2024.

The increase is primarily due to increases of $178,828 in financing-related costs and $162,522 in insurance costs, partially offset by decreases of $138,158 in Delaware franchise taxes and $12,434 in travel-related expenses.

Reserve for credit losses and other expenses

In the year ended December 31, 2023, the Company recognized a Reserve for credit losses of $5.3 million, reflecting our conclusion that it was not probable that we would recover the interest reserve deposit established upon entering the credit agreement with Prime Capital Ventures (the “Lender”) based on facts known as of December 31, 2023.

Subsequent to December 31, 2023, the Lender defaulted on its obligation to refund the interest reserve deposit.

In coordination with other entities who were also defrauded by the Lender, the Company continues efforts to recover funds paid for an interest reserve through ongoing receivership and legal remedies.

The scheme resulted in the misdirection of approximately $1.3 million held in Company accounts to a fraudulent account controlled by a third party.

The Company pursued all available remedies to recover this loss and reported this matter to legal authorities.

Given the limited success that these efforts for the recovery of funds, the Company recognized a loss of $1.3 million in the year ended December 31, 2024.

On August 15, 2022, we entered into a loan and security agreement with Cogent Bank to partially fund our purchase of the property we acquired on that same date.

We borrowed $6.5 million under this agreement.

Amounts outstanding on the term loan will accrue interest at a rate per annum equal to 5.75%.

Amounts outstanding on the term loan accrue interest at a rate per annum equal to 5.75%.

We were obligated to make interest-only payments on this loan from September 2022 through August 2023 and principal and interest payments in 47 equal monthly installments, based on a 25-year maturity schedule, commencing September 15, 2023.

We paid $283,042 and $280,794 for interest on this loan for the years ended December 31, 2023 and 2024, respectively.

During the year ended December 31, 2024, the Company issued $6.9 million of Secured Notes, which bear interest at a rate of 9% per annum, payable quarterly in arrears.

For the year ended December 31, 2024, the Company paid $350,343 for interest on the Senior Notes.

Other Income, Net

Other income, net increased by $701,190, from $304,735 for the year ended December 31, 2022 to $1.0 million for the year ended December 31, 2023.

The increase is primarily attributable to an increase in interest earned for money market deposits and unrealized gains for investments in U.S.

Other income, net decreased by $918,935, from $1.0 million for the year ended December 31, 2023 to $86,990 for the year ended December 31, 2024.

The decrease is primarily attributable to decreases in interest earned for money market deposits and unrealized gains for investments in U.S.

government-backed securities.

Other income includes rental income.

Other income for the year ended December 31, 2023 also includes rental income of $185,941.

On August 15, 2022, the Company entered into a short-term, market-rate lease with the former owner of the building we purchased on the same date.

In the year ended December 31, 2023, the lease terminated.

We received rental income of $115,915 and $185,941 in the years ended December 31, 2022 and 2023, respectively.

Liquidity and Capital Resources

Sources of Liquidity

As of December 31, 2023, our principal source of liquidity was $3.6 million in cash and cash equivalents, including money market investments.

While there was substantial doubt over whether the Company had sufficient capital to operate for the next twelve months based on this liquidity, some of the elements of our plans to raise additional capital were probable of being implemented and alleviated the relevant conditions causing substantial doubt over our ability to operate as a going concern.

Since December 31, 2023, there have been financings for $12.5 million, consisting of funds received and legally binding funding commitments.

As of December 31, 2024, our principal source of liquidity was $4.7 million in cash and cash equivalents, including money market investments, and as a result, there was substantial doubt over whether the Company had sufficient capital to operate for the next twelve months from the issuance date of this Annual Report.

We considered elements of our financing plan that were probable and likely to be implemented within the next year.

While we have already begun to successfully execute our financing plan, including a $6.9 million financing and a license agreement with $7.0 million in minimum guarantees payments which the Company expects to receive in 2025, we concluded that remaining steps in our financing plan are not probable and thus they were not sufficient to include in our going concern analysis.

On August 15, 2022, the Company entered into the 2022 Loan Agreement with Cogent Bank, pursuant to which it received $6.5 million in proceeds to purchase a building that will become the Company's new headquarters.

The loan is secured by a first priority lien on the building.

As of December 31, 2024, certain subcontractors have filed mechanics liens related to unpaid invoices issued in connection with the Company’s construction of its new manufacturing facilities and upgraded research laboratories.

On December 16, 2024, BE&K Building Group, the prime contractor on the project, sent the Company a draft, unfiled lawsuit and requested the parties discuss payment.

On January 22, 2025, the Company entered into a forbearance agreement with BE&K to allow the Company until March 31, 2025 to continue efforts to find the financing required to complete the construction and renovation of the building.

Pursuant to the forbearance agreement, the Company made an initial payment of $1.0 million in partial satisfaction of amounts owing to BE&K and its subcontractors.

The 2022 Loan Agreement contains a provision for a discretionary default in the event that the Company fails to pay sums due in connection with construction of any improvements;

however, as of the reporting date, to our knowledge, the lender has not elected to do so.

As of December 31, 2024, the Company has reflected this loan as Short-term debt, net, to reflect that the lender has the right to accelerate the loan under a discretionary default provision at any time.

See Part II, Item 9A.

-- “Controls and Procedures.” The Company continues to seek the financing required to complete the construction project, with the cooperation of the lender and lien holders.

The Company and Dr.

Wong, our Founder and Chief Executive Officer, entered into a Settlement Agreement and Release of the previously reported Arbitration as of July 13, 2024, subsequently, the Arbitration and related Complaint were dismissed on December 24, 2024.

See Part I., Item 3.

- “Legal Proceedings.” While the Settlement Agreement has resolved uncertainty regarding the outcome of these proceedings and the ongoing legal expenses, the Company incurred significant legal expenses in the period leading up to the Settlement Agreement.

As of December 31, 2024, we reported a balance of $14.4 million for legal fees incurred but not yet paid in the accompany audited balance sheet.

Subsequent to the year end, the Company received the benefit of a $2.0 million insurance payment, which was paid directly to the law firm who represented Dr.

Wong for his defense during the Arbitration.

In order not to overwhelm the Company’s resources, a reasonable payment plan is required, and the Company is engaged in discussions with the law firms involved with this matter.

A benefit of reaching a Settlement Agreement and concluding the Arbitration is a release from restrictions related to protection of privileged information, which hampered investor ability to conduct due diligence.

As a result, we believe that other avenues of financing are now available to us, namely, capital-raising activities for equity and equity-like investments as well as business development transactions such as out-licensing agreements for rights for our proprietary molecules.

However, there can be no assurance of our success in our capital-raising activities.

If we are not successful in raising additional capital, we have the ability to revise our business plan and reduce costs.

If such revisions are insufficient, we may have to curtail or cease operations.

In 2024, we have raised $16.3 million in financings from the following capital-raising activities:

• On February 20, 2024, we completed a $2.5 million private placement of common stock in which we sold an aggregate of 1,785,718 shares to certain of our officers and directors, at a purchase price of $1.40 per share.

As of March 31, 2024, we entered into an agreement to issue $10.0 million of secured notes, of which $2.0 million funded prior to filing this Annual Report.

The secured notes were sold to certain of our officers and directors as well as other investors.

We expect our principal sources of liquidity will continue to be our cash and cash equivalents, various non-dilutive financings such as debt and out-licensing agreements for non-core assets, as well as equity financings.

On August 15, 2022, we purchased a 36,000 square foot building located in Miramar, Florida for approximately $10.1 million, including transaction costs.

A portion of the acquisition cost was funded with a $6.5 million five-year loan, secured by the building.

The remainder of the purchase price was funded with cash.

Amounts borrowed under the term facility have a fixed interest rate of 5.75%, with interest only payments required for the first year and 25-year amortization thereafter.

There is no prepayment penalty.

As of December 31, 2023, a balance of $6.4 million remains due for this obligation, $6.3 million of which is classified as a noncurrent liability included in Debt, net in the balance sheet included in the audited financial statements included elsewhere in this Annual Report.

As of December 31, 2023, we were in compliance with all covenants under the loan agreement and related documents.

Our plans include other financings which we are targeting to complete in the next three to six months.

However, if we are not successful in raising additional capital, management is prepared to put a plan in place that we believe will make necessary adjustments to our operations such that our cash and cash equivalents as of December 31, 2023, funds the Company received since year end, and funds the Company expects to receive from legally binding commitments obtained since year end are sufficient to meet our capital requirements and fund our operations for at least the next 12 months.

In order to mitigate the relevant conditions giving rise to substantial doubt, it may be necessary to delay, reduce, or eliminate some of our product development programs, our efforts to establish manufacturing capacity, headcount and other operating costs, as well as our commercialization efforts.

We have based our projections on assumptions, including our existing commitments and contingencies, that may prove to be incorrect, and we may use all of our available capital sooner than we expect.

• As of October 31, 2024, we received approximately $6.9 million from the issuance of Secured Notes.

Of the total issuance of Secured Notes, the Company issued $2.9 million to members of the Company’s board of directors and officers, including $2.4 million purchased by Dr.

Wong, Founder and CEO, $220,000 purchased by Rebecca Byam, Chief Financial Officer, $140,000 purchased by Scott T.

Garrett, Chairman of the board of directors, $60,000 purchased by Gary M.

Winer, member of the board of directors, $25,000 purchased by Lee Flowers, Senior Vice President for Business Development, and $25,000 purchased by Rick S.

Greene, member of the board of directors.

• On November 20, 2024, the Company closed on an investment from a single institutional investor (the “Purchaser”) in which the Company issued 4,160,000 shares of the Company’s Common Stock and Pre-Funded Warrants to purchase up to 2,557,000 shares of Common Stock in a registered direct offering.

In a concurrent private placement, the Company issued unregistered warrants to purchase up to an aggregate of 6,717,000 shares of Common Stock (“Common Stock Warrants”).

The combined purchase price for each share and accompanying Common Stock Warrant to purchase one share of common stock is $1.03 per Share and the combined purchase price for each Pre-Funded Warrant and accompany Common Stock Warrant to purchase one share of common stock is $1.0299.

The Purchaser elected to exercise the Pre-Funded Warrants on the date of issuance.

As a result, the Company issued an aggregate of 6,717,000 shares of Common Stock and Common Stock Warrants to purchase up to an aggregate 6,717,000 shares of Common Stock for a period of five years.

Subsequent to the end of the reporting period, on February 20, 2025, the Company entered into an Equity Line of Credit Agreement (“ELOC”) for up to $20.0 million (with the potential to increase by an additional $20.0 million) as another element of the Company’s multi-step financing plan.

We intend to register shares that will allow us to access the ELOC based on the financial information included in this Annual Report on Form 10-K.

On November 17, 2024, HCW Biologics entered into an exclusive worldwide license agreement with WY Biotech for the rights to develop and commercialize one of HCWB’s preclinical product candidates, HCW11-006.

WY Biotech Co., Ltd.

is a China-based company specializing in the early-stage development of recombinant protein drugs and gene/cell therapies.

Specifically, in order to accommodate the delay, the parties agreed to restructure the payment schedule for the $7.0 million upfront license fees, including delaying the initial $4.0 million portion thereof that was originally due on or about March 17, 2025, to reduce the performance milestones that the Company must complete in order to earn the full $7.0 million nonrefundable upfront payments in June 2025, and to provide that either party may terminate the Agreement if WY Biotech is not able to definitively engage its CDMO by June 2025.

Under the amended terms, the Company expects to fulfill our performance obligations and earn the full $7.0 million upfront fee in June 2025.

In particular, the Company will retain the Opt-In Right thereunder, which gives the Company the option to assume all control and responsibility for the development, manufacture and commercialization of HCW11-006 for in vivo applications in the North America, South America, and Central America.

The Company retains ex vivo rights.

See Exhibits 10.27 and 10.28 to this Annual Report on Form 10-K.

We considered future elements of our financing plan that were probable and likely to be implemented within the next year to determine if financing activities currently underway are sufficient mitigate the substantial doubt in our going concern analysis.

We have capital-raising activities planned for the first half of 2025, for which Maxim Group will act as our Placement Agent.

If the Company is not successful in raising additional capital through these activities, management may need to revise its business plan and reduce costs.

If such revisions are insufficient, the Company may have to curtail or cease operations.

The accompanying audited financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business.

The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.

The Company believes that substantial doubt exists regarding its ability to continue as a going concern for at least 12 months from the date of issuance of the Company’s audited financial statements, without additional funding or financial support.

After considering management’s plan for financing and funds raised that are probable to occur within one year, as well as that the Company expects to continue to incur losses from operations for the foreseeable future, management concluded that the substantial doubt that existed in its going concern analysis as of December 31, 2024 was not alleviated.

Because of the numerous risks and uncertainties associated with the clinical development and commercialization of immunotherapeutics, we are unable to estimate the exact amount of capital requirements to pursue these activities.

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• timing, progress, costs, and results of our ongoing preclinical studies and clinical trials of our immunotherapeutic products;

• impact of COVID-19 on the timing and progress of our IND-enabling activities, clinical trials and our ability to identify and enroll patients;

• costs, timing, and outcome of regulatory review of our product candidates;

• number of trials required for regulatory approval;

• whether we enter into any collaboration or co-development agreements and the terms of such agreements;

• costs, timing, and outcome of regulatory review of our product candidates;number of trials required for regulatory approval;

• whether we enter into any cooperative, collaboration or co-development agreements and the terms of such agreements;

• whether we raise additional funding through bank loan facilities, other debt arrangements, out-licensing or joint ventures, cooperative agreements or strategic collaborations;

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• cost of maintaining, expanding, and enforcing our intellectual property rights;

• impact of litigation, regulatory inquiries, or investigations, as well as costs to indemnify our officers and directors against third-party claims related to our patents and other intellectual property;

• cost and timing of buildout of new headquarters, including risks of cost overruns and delays, and ability to obtain additional financing, if needed;

• impact of arbitration, litigation, regulatory inquiries, or investigations, as well as costs to indemnify our officers and directors against third-party claims related to our patents and other intellectual property:

• cost and timing of buildout of the Company’s new headquarters, including manufacturing for biologics and upgraded research and development facilities, including risks of cost overruns and delays, and ability to obtain additional financing, if needed;

• costs and timing of future commercialization activities, including product manufacturing, marketing, sales, and distribution, for any of our product candidates for which we receive regulatory approval.

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Cash used in operating activities

Cash provided by investing activities

Cash provided by (used in) financing activities

Net increase (decrease) in cash and cash equivalents

Cash provided by (used in) investing activities

Cash (used in) provided by financing activities

Net (decrease) increase in cash and cash equivalents

Operating Activities

Net cash used in operating activities was $22.5 million for the year ended December 31, 2023 and $14.2 million for the year ended December 31, 2024.

Cash used in operating activities for the year ended December 31, 2022 consisted primarily of a net loss of $14.9 million, $284,695 cash used arising from an increase in accounts receivable, and $128,246 cash used by a decrease in a lease liability.

These uses were partially offset primarily by a $2.5 million cash increase arising from a decrease in prepaid expenses and other assets, a $418,208 cash increase arising from an increase in accounts payable and other liabilities, and adjustments for noncash expenses of $2.0 million, consisting of $1.1 million for stock-based compensation expense, $717,854 for depreciation and amortization expense, and $186,370 for net unrealized loss on investments.

Cash used in operating activities for the year ended December 31, 2023 consisted primarily of a net loss of $25.0 million, which includes a $5.3 million noncash charge for reserve for credit losses related to the full impairment of the interest reserve deposit.

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and a net increase of $7.3 million arising from adjustments for noncash expenses, consisting of $5.3 million for reserve for credit losses, $1.0 million for stock-based compensation expense, $1.1 million for depreciation and amortization expense, partially offset by a decrease of $248,445 for net unrealized gain on investments.

Cash used in operating activities for the year ended December 31, 2024 consisted primarily of a net loss of $30.0 million, which includes $15.9 million of legal expenses related to legal proceedings and a $1.3 million loss related to a misdirection of funds resulting from the Company being a victim of criminal activity.

Cash provided by operating activities included a $11.9 million increase resulting from the increase of accounts payable and other liabilities;

a $1.0 million increase resulting from a decrease in accounts receivable;

and a $831,622 increase related to a decrease in prepaid expenses and other assets.

Adjustments for noncash changes also gave rise to an increase in cash from operating activities, including increases of $1.2 million for depreciation, amortization and accretion and a $1.0 million from unrealized losses.

Investing Activities

For the year ended December 31, 2022, cash provided by investing activities was $14.7 million, consisting of proceeds for maturity of short-term investments of $25.0 million, offset by $10.0 million of cash used to purchase the property which we intend to convert to our new headquarters and manufacturing facility.

For the year ended December 31, 2023, cash provided by investment activities was $3.8 million, consisting of proceeds for maturity of short-term investments of $10.0 million, offset by $6.2 million of cash used for construction of our new headquarters and manufacturing facility.

For the year ended December 31, 2024, cash used in investment activities was $261,617, consisting of cash used for construction of our new headquarters and manufacturing facility.

Financing Activities

For the year ended December 31, 2022, cash provided by financing activities was $6.3 million, consisting primarily of net proceeds of issuance of debt reflecting the $6.5 million loan used to fund the purchase of the Company's new headquarters.

For the year ended December 31, 2023, cash used in financing activities was $14,534, consisting of cash used for debt repayment of $38,273, offset by cash provided by proceeds from the issuance of common stock of $23,739.

For the year ended December 31, 2023, cash used in financing activities was $14,534, consisting of cash used for debt repayment of $38,273, partially offset by cash provided by proceeds from the issuance of common stock of $23,739.

For the year ended December 31, 2024, cash provided by financing activities was $15.7 million, consisting of $6.5 million of cash provided through the issuance of common stock, $6.9 million of cash provided through the issuance of Secured Notes, $2.9 million of cash provided through the issuance of warrants, partially offset by $119,398 of cash used for debt repayment and $638,045 of cash used for issuance costs for common stock and warrants.

Contractual Obligations and Commitments

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On January 30, 2024, we entered into a new one-year lease for the same location, effective March 1, 2024.

The remaining lease payments under the new short-term lease is $274,823.

On January 27, 2025, we entered into a Lease Modification and Extension Agreement for a one-year lease for the same location, effective March 1, 2025.

We have commitments with a third-party manufacturing organization to supply us with clinical grade materials.

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Our obligations under the agreement are secured by, among other things, a mortgage on our new corporate headquarters and related real property.

As of December 31, 2023, $6.4 million was outstanding under the term loan and we were in compliance with all loan covenants.

As of December 31, 2024, $6.3 million was outstanding under the term loan and we were in current in our interest and principal payments.

In accordance with the terms of our loan and security agreement, the Company maintains an account at Cogent Bank as security, with a balance sufficient for the payment of interest, principal and insurance costs for a period of 90 - 120 days.

The loan agreement with Cogent Bank contains a provision for a discretionary default in the event that the Company fails to pay sums due in connection with construction of any improvements;

however, as of the reporting date, the lender has not elected to do so.

As of December 31, 2024, the Company has reflected this loan as Short-term debt, net, to reflect that Cogent Bank has the right to accelerate the loan under a discretionary default provision, even though they have not elected to do so.

The Company continues to seek the financing required to complete the construction project, with the cooperation of the lender and lien holders.

See Part II, Item 9A.

-- “Controls and Procedures.”

Critical Accounting Policies, Significant Judgements and Use of Estimates

58 unchanged sentences

The federal NOLs are available to offset 80% of taxable income for state taxes for tax years starting after 2020.

In addition, we had federal research and development credits carryforwards of $720,165 and $1.3 million, as of December 31, 2022 and 2023, respectively.

In addition, we had federal research and development credits carryforwards of $1.3 million and $1.5 million, as of December 31, 2023 and 2024, respectively.

These credits are available to reduce future federal income taxes, if any, and carryforwards expire from 2038 through 2044 and are subject to review and possible adjustment.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis